CONMED Corporation (NYSE: CNMD) today announced financial
results for the third quarter ended September 30, 2023.
Third Quarter 2023 Highlights
- Sales of $304.6 million increased 10.7% year over year as
reported and 11.9% in constant currency. Acquisitions contributed
approximately 40 basis points of growth.
- Domestic revenue increased 9.5% year over year.
- International revenue increased 12.3% year over year as
reported and 15.1% in constant currency.
- Diluted net earnings per share (GAAP) were $0.50 compared to
diluted net earnings per share (GAAP) of $1.48 in the third quarter
of 2022.
- Adjusted diluted net earnings per share(1) were $0.90, an
increase of 16.9% compared to the third quarter of 2022.
“The third quarter saw our team drive double-digit revenue and
earnings growth amid healthy end markets,” commented Curt R.
Hartman, CONMED’s Chair of the Board, President, and Chief
Executive Officer. “I’m proud of what we’ve accomplished year to
date in 2023, particularly that the team has been able to drive
above-market revenue growth in both businesses.”
2023 Outlook
Based on the third quarter results, the Company now expects
full-year revenue between $1.240 billion and $1.260 billion,
compared to its prior guidance of between $1.230 billion and $1.260
billion.
The Company now expects full-year 2023 adjusted diluted net
earnings per share(2) in the range of $3.45 to $3.55, compared to
its prior range of $3.40 to $3.55.
The expected impact of foreign currency exchange rates remains
consistent with the range provided in our original guidance for
2023.
Supplemental Financial Disclosures
(1) A reconciliation of reported diluted net earnings (loss) per
share to adjusted diluted net earnings per share, a non-GAAP
financial measure, appears below.
(2) Information reconciling forward-looking adjusted diluted net
earnings per share to the comparable GAAP financial measures is
unavailable to the company without unreasonable effort, as
discussed below.
Conference Call
The Company’s management will host a conference call today at
4:30 p.m. ET to discuss its third quarter 2023 results.
To participate in the conference call via telephone, please
click here to pre-register and obtain the dial-in number and
passcode.
This conference call will also be webcast and can be accessed
from the “Investors” section of CONMED's website at www.conmed.com.
The webcast replay of the call will be available at the same site
approximately one hour after the end of the call.
Consolidated Condensed
Statements of Income (Loss)
(in thousands except per share
amounts, unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net sales
$
304,578
$
275,088
$
917,699
$
794,605
Cost of sales
136,519
123,473
423,629
355,222
Gross profit
168,059
151,615
494,070
439,383
% of sales
55.2%
55.1%
53.8%
55.3%
Selling & administrative expense
125,295
114,600
385,080
333,302
Research & development expense
12,464
12,767
38,574
34,932
Income from operations
30,300
24,248
70,416
71,149
% of sales
9.9%
8.8%
7.7%
9.0%
Interest expense
10,019
8,536
30,271
19,462
Other expense
-
-
-
112,011
Income (loss) before income taxes
20,281
15,712
40,145
(60,324)
Provision (benefit) for income taxes
4,444
(30,438)
8,757
46,842
Net income (loss)
$
15,837
$
46,150
$
31,388
$
(107,166)
Basic EPS
$
0.52
$
1.51
$
1.02
$
(3.59)
Diluted EPS
0.50
1.48
0.99
(3.59)
Basic shares
30,741
30,473
30,638
29,892
Diluted shares
31,689
31,103
31,563
29,892
Sales Summary
(in millions, unaudited)
Three Months Ended September
30,
% Change
Domestic
International
2023
2022
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
As
Reported
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
Orthopedic Surgery
$
124.7
$
118.6
5.1%
1.3%
6.4%
1.3%
7.5%
2.2%
9.7%
General Surgery
179.9
156.5
15.0%
1.0%
16.0%
12.9%
19.9%
3.9%
23.8%
$
304.6
$
275.1
10.7%
1.2%
11.9%
9.5%
12.3%
2.8%
15.1%
Single-use Products
$
253.3
$
231.3
9.5%
1.1%
10.6%
9.3%
9.7%
2.8%
12.5%
Capital Products
51.3
43.8
17.1%
1.5%
18.6%
10.6%
23.0%
3.2%
26.2%
$
304.6
$
275.1
10.7%
1.2%
11.9%
9.5%
12.3%
2.8%
15.1%
Domestic
$
170.5
$
155.7
9.5%
0.0%
9.5%
International
134.1
119.4
12.3%
2.8%
15.1%
$
304.6
$
275.1
10.7%
1.2%
11.9%
Nine Months Ended September
30,
% Change
Domestic
International
2023
2022
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
As
Reported
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
Orthopedic Surgery
$
396.6
$
346.3
14.5%
2.7%
17.2%
18.9%
12.1%
4.1%
16.2%
General Surgery
521.1
448.3
16.2%
1.7%
17.9%
16.1%
16.6%
5.6%
22.2%
$
917.7
$
794.6
15.5%
2.1%
17.6%
16.9%
13.8%
4.6%
18.4%
Single-use Products
$
767.3
$
663.1
15.7%
2.1%
17.8%
17.3%
13.6%
4.7%
18.3%
Capital Products
150.4
131.5
14.3%
2.3%
16.6%
14.0%
14.6%
4.3%
18.9%
$
917.7
$
794.6
15.5%
2.1%
17.6%
16.9%
13.8%
4.6%
18.4%
Domestic
$
509.8
$
436.1
16.9%
0.0%
16.9%
International
407.9
358.5
13.8%
4.6%
18.4%
$
917.7
$
794.6
15.5%
2.1%
17.6%
Reconciliation of Reported Net
Income to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended September
30, 2023
Gross Profit
Selling &
Administrative
Expense
Operating
Income
Interest
Expense
Tax
Expense
Effective
Tax Rate
Net Income
Basic EPS
Adjustments
Diluted EPS
As reported
$
168,059
$
125,295
$
30,300
$
10,019
$
4,444
21.9%
$
15,837
$
-
$
15,837
% of sales
55.2%
41.1%
9.9%
EPS
$
0.52
$
0.50
Shares
30,741
948
31,689
Acquisition and integration costs(1)
2,194
-
2,194
-
222
1,972
Contingent consideration fair value
adjustment(2)
-
(3,150)
3,150
-
320
2,830
$
170,253
$
122,145
$
35,644
$
10,019
$
4,986
$
20,639
Adjusted gross profit %
55.9%
Amortization(3)
$
1,500
(7,238)
8,738
(1,546)
2,491
7,793
As adjusted
$
114,907
$
44,382
$
8,473
$
7,477
20.8%
$
28,432
$
-
$
28,432
% of sales
37.7%
14.6%
Adjusted diluted EPS
$
0.90
Shares
30,741
948
31,689
Convertible note hedges(4)
(178)
Adjusted diluted shares
31,511
Three Months Ended September
30, 2022
Gross Profit
Selling &
Administrative
Expense
Operating
Income
Interest
Expense
Tax
Expense
(Benefit)
Effective
Tax Rate
Net Income
Basic EPS
Adjustments(5)
Diluted EPS
As reported
$
151,615
$
114,600
$
24,248
$
8,536
$
(30,438)
-193.7%
$
46,150
$
-
$
46,150
% of sales
55.1%
41.7%
8.8%
EPS
$
1.51
$
1.48
Shares
30,473
630
31,103
Acquisition and integration costs(1)
2,096
(3,706)
5,802
-
35,852
(30,050)
$
153,711
$
110,894
$
30,050
$
8,536
$
5,414
$
16,100
Adjusted gross profit %
55.9%
Amortization(3)
$
1,500
(7,193)
8,693
(1,488)
2,484
7,697
As adjusted
$
103,701
$
38,743
$
7,048
$
7,898
24.9%
$
23,797
$
-
$
23,797
% of sales
37.7%
14.1%
Adjusted diluted EPS
$
0.77
Shares
30,473
630
31,103
Convertible note hedges(4)
(45)
Adjusted diluted shares
31,058
(1) In 2023, the Company incurred charges
related to the amortization of inventory step-up to fair value
associated with the acquisition of In2Bones Global, Inc. In 2022,
the Company incurred charges related to the amortization of
inventory step-up to fair value and consulting fees, legal fees,
and other integration costs associated with the acquisitions of
In2Bones Global, Inc. and Biorez, Inc.
(2) In 2023, the Company incurred expense
related to the fair value adjustments of contingent
consideration.
(3) Includes amortization of intangible
assets and deferred financing fees.
(4) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company’s convertible notes hedge transactions.
(5) The Company adopted ASU 2020-06,
effective January 1, 2022. As a result of the adoption, the Company
is required to compute diluted EPS using the if-converted method.
Under the if-converted method, the numerator is adjusted for
interest expense applicable to its convertible notes (net of tax)
and the denominator includes additional common shares assuming
conversion premium and principal portion of the notes (when
permitted or required) are settled in shares. Subsequent to June 6,
2022, the Company is required to settle the principal value of its
convertible notes in cash.
Reconciliation of Reported Net
Income (Loss) to Adjusted Net Income
(in thousands, except per
share amounts, unaudited)
Nine Months Ended September
30, 2023
Gross Profit
Selling &
Administrative
Expense
Operating
Income
Interest
Expense
Other
Expense
Tax
Expense
Effective
Tax Rate
Net
Income
Basic
EPS
Adjustments
Diluted EPS
As reported
$
494,070
$
385,080
$
70,416
$
30,271
$
-
$
8,757
21.8%
$
31,388
$
-
$
31,388
% of sales
53.8%
42.0%
7.7%
EPS
$
1.02
$
0.99
Shares
30,638
925
31,563
Acquisition and integration costs(1)
6,463
(752)
7,215
-
-
1,369
5,846
Termination of distributor
agreements(2)
-
(2,098)
2,098
-
-
417
1,681
Restructuring and related costs(3)
2,035
(1,578)
3,613
-
-
930
2,683
Software implementation costs(4)
-
(6,056)
6,056
-
-
1,453
4,603
Contingent consideration fair value
adjustment(5)
-
(6,949)
6,949
-
-
1,334
5,615
$
502,568
$
367,647
$
96,347
$
30,271
$
-
$
14,260
$
51,816
Adjusted gross profit %
54.8%
Amortization(6)
$
4,500
(21,773)
26,273
(4,558)
-
7,511
23,320
As adjusted
$
345,874
$
122,620
$
25,713
$
-
$
21,771
22.5%
$
75,136
$
-
$
75,136
% of sales
37.7%
13.4%
Adjusted diluted EPS
$
2.39
Shares
30,638
925
31,563
Convertible note hedges(7)
(152)
Adjusted diluted shares
31,411
Nine Months Ended September
30, 2022
Gross Profit
Selling &
Administrative
Expense
Operating
Income
Interest
Expense
Other
Expense
Tax
Expense
Effective
Tax Rate
Net
Income
(Loss)
Basic
EPS
Adjustments(12)
Diluted EPS
As reported
$
439,383
$
333,302
$
71,149
$
19,462
$
112,011
$
46,842
-77.7%
$
(107,166)
$
-
$
(107,166)
% of sales
55.3%
41.9%
9.0%
EPS
$
(3.59)
$
(3.59)
Shares
29,892
-
29,892
Acquisition and integration costs(1)
2,445
(6,306)
8,751
-
-
34,092
(25,341)
Legal matters(8)
-
(775)
775
-
-
(462)
1,237
Convertible note premium on
extinguishment(9)
-
-
-
-
(103,125)
(61,521)
164,646
Change in fair value of convertible note
hedges upon settlement(10)
-
-
-
-
(5,460)
(3,257)
8,717
Loss on early extinguishment of
debt(11)
-
-
-
-
(3,426)
(2,044)
5,470
$
441,828
$
326,221
$
80,675
$
19,462
$
-
$
13,650
$
47,563
Adjusted gross profit %
55.6%
Amortization(6)
$
4,500
(20,563)
25,063
(3,404)
-
6,934
21,533
As adjusted
$
305,658
$
105,738
$
16,058
$
-
$
20,584
23.0%
$
69,096
$
2,978
$
72,074
% of sales
38.5%
13.3%
Adjusted diluted EPS
$
2.22
Shares
29,892
3,392
33,284
Convertible note hedges(7)
(771)
Adjusted diluted shares
32,513
(1) In 2023, the Company incurred charges
related to the amortization of inventory step-up to fair value
associated with the acquisition of In2Bones Global, Inc., and
integration costs and professional fees associated with the
acquisitions of In2Bones Global, Inc. and Biorez, Inc. In 2022, the
Company incurred charges related to the amortization of inventory
step-up to fair value and consulting fees, legal fees, and other
integration costs associated with the acquisitions of In2Bones
Global, Inc. and Biorez, Inc.
(2) In 2023, the Company incurred costs
related to the termination of distributor agreements.
(3) In 2023, the Company incurred
consulting fees related to an operational cost improvement
initiative and severance related to the elimination of certain
positions.
(4) In 2023, the Company incurred
incremental freight, labor and professional fees related to the
implementation of a warehouse management software.
(5) In 2023, the Company incurred expense
related to the fair value adjustment of contingent
consideration.
(6) Includes amortization of intangible
assets and deferred financing fees.
(7) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company’s convertible notes hedge transactions.
(8) In 2022, the Company incurred costs
related to a legal settlement.
(9) In 2022, the Company incurred costs
related to the conversion premium on the repurchase and
extinguishment of $275.0 million of its 2.625% Convertible
Notes.
(10) In 2022, the Company incurred costs
related to the settlement of convertible notes hedge transactions
associated with the repurchase and extinguishment of $275.0 million
of its 2.625% Convertible Notes.
(11) In 2022, the Company incurred costs
related to the write-off of deferred financing fees associated with
the repurchase and extinguishment of $275.0 million of its 2.625%
Convertible Notes and term loan paydown.
(12) The Company adopted ASU 2020-06,
effective January 1, 2022. As a result of the adoption, the Company
is required to compute diluted EPS using the if-converted method.
Under the if-converted method, the numerator is adjusted for
interest expense applicable to its convertible notes (net of tax)
and the denominator includes additional common shares assuming
conversion premium and principal portion of the notes (when
permitted or required) are settled in shares. Subsequent to June 6,
2022, the Company is required to settle the principal value of its
convertible notes in cash. Adjustments in 2022 are applicable on a
non-GAAP basis only since GAAP results are in a loss position and
therefore exclude dilutive potential shares.
Reconciliation of Reported Net
Income (Loss) to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income (loss)
$
15,837
$
46,150
$
31,388
$
(107,166)
Provision (benefit) for income taxes
4,444
(30,438)
8,757
46,842
Interest expense
10,019
8,536
30,271
19,462
Depreciation
3,926
3,938
12,148
12,028
Amortization
13,947
13,689
41,724
39,754
EBITDA
$
48,173
$
41,875
$
124,288
$
10,920
Stock based compensation
6,186
5,754
18,334
15,972
Acquisition and integration costs
2,194
5,802
7,215
8,751
Contingent consideration fair value
adjustment
3,150
-
6,949
-
Termination of distributor agreements
-
-
2,098
-
Restructuring and related costs
-
-
3,613
-
Software implementation costs
-
-
6,056
-
Legal matters
-
-
-
775
Convertible notes premium on
extinguishment
-
-
-
103,125
Change in fair value of convertible notes
hedges upon settlement
-
-
-
5,460
Loss on early extinguishment of debt
-
-
-
3,426
Adjusted EBITDA
$
59,703
$
53,431
$
168,553
$
148,429
EBITDA Margin
EBITDA
15.8%
15.2%
13.5%
1.4%
Adjusted EBITDA
19.6%
19.4%
18.4%
18.7%
About CONMED Corporation
CONMED is a medical technology company that provides devices and
equipment for surgical procedures. The Company’s products are used
by surgeons and other healthcare professionals in a variety of
specialties including orthopedics, general surgery, gynecology,
thoracic surgery, and gastroenterology. For more information, visit
www.conmed.com.
Forward-Looking Statements
This press release and associated conference call may contain
forward-looking statements based on certain assumptions and
contingencies that involve risks and uncertainties, which could
cause actual results, performance, or trends to differ materially
from those expressed in the forward-looking statements herein or in
previous disclosures. For example, in addition to general industry
and economic conditions, factors that could cause actual results to
differ materially from those in the forward-looking statements may
include, but are not limited to the risk factors discussed in the
Company's Annual Report on Form 10-K for the full year ended
December 31, 2022, listed under the heading Forward-Looking
Statements in the Company’s most recently filed Form 10-Q and other
risks and uncertainties, which may be detailed from time to time in
reports filed by CONMED with the SEC. Any and all forward-looking
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and relate to the
Company’s performance on a going-forward basis. The Company
believes that all forward-looking statements made by it have a
reasonable basis, but there can be no assurance that management’s
expectations, beliefs or projections as expressed in the
forward-looking statements will actually occur or prove to be
correct.
Supplemental Information - Reconciliation of GAAP to Non-GAAP
Financial Measures
The Company supplements the reporting of its financial
information determined under generally accepted accounting
principles in the United States (GAAP) with certain non-GAAP
financial measures, including percentage sales growth in constant
currency; adjusted gross profit; cost of sales excluding specified
items; adjusted selling and administrative expenses; adjusted
operating income; adjusted interest expense; adjusted other
expense; adjusted income tax expense; adjusted effective income tax
rate; adjusted net income, adjusted diluted shares and adjusted
diluted net earnings per share (EPS). The Company believes that
these non-GAAP measures provide meaningful information to assist
investors and shareholders in understanding its financial results
and assessing its prospects for future performance. Management
believes percentage sales growth in constant currency and the other
adjusted measures described above are important indicators of its
operations because they exclude items that may not be indicative
of, or are unrelated to, its core operating results and provide a
baseline for analyzing trends in the Company’s underlying business.
Further, the presentation of EBITDA is a non-GAAP measurement that
management considers useful for measuring aspects of the Company’s
cash flow. Management uses these non-GAAP financial measures for
reviewing the operating results and analyzing potential future
business trends in connection with its budget process and bases
certain management incentive compensation on these non-GAAP
financial measures.
Net sales on a constant currency basis is a non-GAAP measure.
The Company analyzes net sales on a constant currency basis to
better measure the comparability of results between periods. To
measure percentage sales growth in constant currency, the Company
removes the impact of changes in foreign currency exchange rates
that affect the comparability and trend of net sales. To measure
earnings performance on a consistent and comparable basis, the
Company excludes certain items that affect the comparability of
operating results and the trend of earnings. These adjustments are
irregular in timing, may not be indicative of past and future
performance and are therefore excluded to allow investors to better
understand underlying operating trends.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies' non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for reported sales growth, gross
profit, cost of sales, selling and administrative expenses,
operating income, interest expense, other expense, income tax
expense (benefit), effective income tax rate, net income (loss),
diluted shares and diluted net earnings (loss) per share, the most
directly comparable GAAP financial measures. These non-GAAP
financial measures are an additional way of viewing aspects of the
Company’s operations that, when viewed with GAAP results and the
reconciliations to corresponding GAAP financial measures above,
provide a more complete understanding of the business. The Company
strongly encourages investors and shareholders to review its
financial statements and publicly filed reports in their entirety
and not to rely on any single financial measure.
We are unable to present a quantitative reconciliation of our
expected diluted net earnings per share to expected adjusted
diluted net earnings per share as we are unable to predict with
reasonable certainty and without unreasonable effort the impact and
timing of acquisition, integration and other charges. The financial
impact of these items is uncertain and is dependent on various
factors, including timing, and could be material to our
consolidated condensed statements of income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025160441/en/
CONMED Corporation Todd W. Garner Chief
Financial Officer 727-214-2975
ToddGarner@conmed.com
CONMED (NYSE:CNMD)
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